Powell Suggests QT Ends in Months 🚀

• It could be close to the final stage of shrinking its balance sheet in a few months.
• There are some signs of liquidity tightening in the short-term funds market.
• The Fed believes it can afford to adjust its balance sheet to be more agile.
• Fed officials are discussing the composition of the balance sheet.
• In the long run, it aims to maintain a balance sheet centered on government bonds.
• The Fed’s policy instruments are working very effectively.
• Disenfranchising the Fed’s authority to pay interest would greatly complicate the adjustment of interest rates.
• For reference, according to recent Fed members’ comments, the appropriate reserve level is expected to be between $2.7 and $2.8 trillion, and the time to reach that standard is expected to be around the second quarter of next year. 🙇♂️

[Policy interest rate]

• The downside risk to the job market has increased.
• This supports the legitimacy of the September rate cut.
• Recent data point to a “low-hire, low-fire” phase in which employment does not increase or decrease actively.
• At the same time, data are confirming that tariffs are increasing price pressures.
• Currently, there is no “risk-free path” at all.
• The indicators now secured show that the U.S. economy is at a similar level to September’s.
• Indicators before the shutdown suggested growth was better than expected.
• The future direction of monetary policy will be determined by data and risk assessment.